Would Obama’s new regulator ban ObamaCare?

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Would the Baucus healthcare reform plan pass muster with the Consumer Financial Protection Agency? That’s the new regulator the Obama White House wants to create to protect Americans from deceptive or confusing mortgages, loans and credit card agreements that contain hidden fees, costs, rates or other time bombs potentially harmful to one’s financial health.

Good thing for Democrats that the proposed consumer agency — some incarnation of which will almost certainly make it into law — won’t have health insurance as part of its regulatory portfolio. If it did, it might ban BaucusCare.

Its cost structure, for instance, is reminiscent of a teaser-rate mortgage. The whole deal seems affordable at first — but then costs skyrocket.

The Congressional Budget Office assigned a 10-year cost estimate of $829 billion to the preliminary version of the Baucus bill. As such, it meets the president’s goal of a bill of $900 billion or less – and avoiding a $1 trillion price tag sure to cause sticker shock among voters.

It accomplishes this financial feat, however, through budgetary trickery. The plan includes a start year of 2010, even though no money is spent that year and just $14 billion through 2013. Cost the plan out from 2011 through 2020 and it suddenly morphs into a trillion-dollar plan. Indeed, the average annual cost from 2015 through 2019 is $150 billion a year

Democrats, to be sure, have powerful rejoinder: the bill may cost a lot, but it actually saves moneycompared with doing nothing. The CBO projects $81 billion in savings over the first decade and then “the added revenues and cost savings are projected to grow more rapidly than the cost of the coverage expansion.”

Great news. But those savings will materialize only if Congress actually cuts a projected $400 billion in government healthcare spending — including Medicare reimbursements to hospitals, doctors and other providers – over 10 years.

Skepticism here is warranted. Previous congressional promises to cut reimbursements haven’t panned out. And Senator Debbie Stabenow, a Michigan Democrat, has just introduced a bill that would actually increase Medicare fees to doctors by $247 billion over the next decade That $247 billion should, by all rights, be added to the cost of the Baucus bill. (Interestingly, if Congress actually stuck to the cuts, the tax increases would not be necessary, according to the Tax Foundation.)

Then there are the hidden fees. The Baucus bill imposes a $200 billion excise tax on expensive insurance plans. That’s a cost insurers will certainly pass onto consumers, nearly 90 percent of whom would make under $200,000, according to the Joint Committee on Taxation. That kind of sounds like a stealth middle-class tax increase.

And you can be sure few taxpayers understand that a catch accompanies new government subsidies to cover the cost of private insurance. Those subsidies phase out as incomes rise. The result is a huge effective tax increase. As the CBO puts it: “Marginal tax rates would go up by about 22 percentage points for all families whose income was between 100 percent and 400 percent of the poverty level.”

Author Profile

James Pethokoukis is the Money & Politics columnist for Reuters Breakingviews. Previously, he was the business editor and economics columnist for U.S. News & World Report. Pethokoukis has written for many publications including The New York Times, The Weekly Standard, Commentary, USA Today, and Investor's Business Daily. Pethokoukis is also an official CNBC contributor. In addition, he has appeared numerous times on MSNBC, Fox News Channel, Fox Business Network, The McLaughlin Group, CNN, and Nightly Business Report on PBS. A graduate of Northwestern University and the Medill School of Journalism, Pethokoukis is a 2002 Jeopardy! champion. james.pethokoukis@thomsonreuters.com